Over the last few days, “Can I get a COVID loan with a felony on my record,” is a question that has come up enough that it’s worth talking about. Although I don’t work for the SBA or the Treasury and am neither an accountant nor an attorney, I can share some of the information published by the SBA on the topic, including some guidance shared on April 7, 2020 in an FAQ released by the SBA.
A Felony on Your Record Does Not Automatically Disqualify Your Business
When a definitive answer from the SBA found its way into my inbox regarding eligibility for the PPP for a former felon, I knew it was important enough to share right away. Although it’s possible this could change, as of today, this is what the SBA is saying about the topic:
“Businesses are only ineligible if an owner of 20 percent or more of the equity of the applicant is presently incarcerated, on probation, on parole; subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or, within the last five years, for any felony, has been convicted; pleaded guilty; pleaded nolo contendere; been placed on pretrial diversion; or been placed on any form of parole or probation (including probation before judgement.”
In other words, is a COVID-19-related small business loan available to someone with a felony on your record? The short answer is, “Yes.” provided you, or any owner with a 20 percent ownership of your business equity does not fall into the category above.
What is the SBA Form 912 and Why Will I Need to Complete It?
Although the short answer is “yes,” and you can get a COVID loan with a felony, there will likely be some additional documentation required before your application can be processed—Including the SBA form 912.
The 912 form is a statement of personal history. An SBA evaluation of you and your business typically includes some questions about the borrower’s personal history—including whether or not they have a criminal record. According to the SBA:
“SBA is collecting the information on this form to make a character and credit eligibility decision to fund or deny you a loan or other form of assistance. The information is required in order for SBA to have sufficient information to determine whether to provide you with the requested assistance. The information collected may be checked against criminal history indices of the Federal Bureau of Investigation.”
The answers to three specific questions on the 912 form will require further explanation to process your loan application:
- Are you presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction?
- Have you been arrested in the past six months for any criminal offense?
- For any criminal offense – other than a minor vehicle violation – have you ever: 1) been convicted; 2) plead guilty; 3) plead nolo contendere; 4) been placed on pretrial diversion; or 5) been placed on any form of parole or probation (including probation before judgment).
If the answer is yes to any of these questions, you will need to furnish details on a separate sheet, including:
- Date of offense, including month, day (if possible) and year.
- City and state, or county and state where offense/s occurred.
- Description of the specific charges (e.g. DUI, assault, forgery, robbery).
- Any fines or sentences
- Description of the level of individual charges (e.g. misdemeanor, felony).
- Dates of parole/probation
- Any unpaid fines or penalties
- Name(s) under which you were charged
- Any other pertinent information
The SBA takes falsifying this document pretty seriously stating:
“An arrest or conviction record will not necessarily disqualify you; however, an untruthful answer will cause you application to be denied and subject to other penalties … Knowingly making a false statement … is a violation of Federal law and could result in criminal prosecution, significant civil penalties, and a denial of your loan, surety bond, or other program protection. A false statement is punishable under 18 USC 1001 and 3571 by imprisonment of not more than five years and/or a fine of up to $25,000; under 15 USC 645 by imprisonment of not more than two years and/or a fine of not more than $5,000; and, if submitted to a Federally insured institution, under 18 USC 1014 by imprisonment of not more than 30 years and/or a fine of not more than $1,000,000.”
If you have further questions about whether or not you meet the qualifications to apply for a PPP loan or other COVID-related financing with a felony on your record, please consult your attorney or accountant.
Please keep in mind this information is changing rapidly and is based on our current understanding of the Paycheck Protection Program. It can and likely will change. Although we will be monitoring and updating this as new information becomes available, please do not rely solely on this for your financial decisions. We encourage you to consult with your lawyers, CPAs, and Financial Advisors. To review your real-time funding options with one of Nav’s lending experts, please contact us.